The SEC recently proposed adding to the required corporate compensation disclosures a rule that would require disclosure of the compensation paid the three most highly paid non-executive officers of a company. The rule would mostly hit firms like Wall Street trading houses, where top traders often can make more than the CEO. It also, however, would have hit Hollywood very hard - so hard that the proposal was known as the Katie Couric clause (since Couric likely will be the most highly paid employee of CBS). I still think there's a plausible argument for requiring such disclosure:
In some industries, of which Hollywood is the leading but not only example, there are key employees who don't technically meet the statutory definition of a corporate officer, but who are very highly paid and critical to the success or failure of the firm. Why then should be disclosure limited to statutory officers?
The chief counter-argument is that the salary of folks like Couric is much more likely to be the product of market forces and arms-length bargaining than is a CEO's salary.
In any case, it looks like Hollywood's won this fight. The W$J reports that the SEC "is expected to scrap or significantly alter" the proposal.
Chairman Chris Cox is setting out the sound policy argument:
Chairman Christopher Cox said he is less concerned about pay for actors and athletes than executives, because the stars' pay is set by market forces. "The difference with executive compensation," Mr. Cox said, crediting two professors, "is that boards of directors of public companies don't always negotiate at arms' length with their executives. And as a result, the executives are often able to influence the level of their own compensation."
There's something curious about the arguments being advanced by other SEC Commissioners:
Democrat Roel Campos said the provision no longer seemed necessary to include. "Investor groups did not see this as very important to them in their need to analyze executive compensation," he said.
What's curious about Campos' argument is that the SEC traditionally has been a very paternalistic agency: It has been concerned with mandating the kinds of disclosures the SEC thinks investors should want rather than with identifying disclosures that investors actually want. Is Campos signalling that SEC policy making might actually become more market-responsive? Or is it just smoke and mirrors to cover caving into Hollywood?